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Solomon Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities Solomon Delivery recently acquired approximately $6.9 million of cash capital from its owners and its president, George Hay, is trying to identify the most profitable way to invest these funds Todd Payne, the company's operations manager believes that the money should be used to expand the fleet of city vans at a cost of $640,000 He argues that more vans would enable the company to expand its services into new markets thereby increasing the revenue base More specifically, he expects cash inflows to increase by $340,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $97000 Operating the vans will require additional working capital of $37000, which will be recovered at the end of the fourth year In contrast, Oscar Vance, the company's chief accountant, believes that the funds should be used to purchase large trucks to deliver the packages between the depots in the two cities. The conversion process would produce continuing improvement in operating savings and reduce cash outflows as follows Year 1 $160,000 Year 2 $313,000 Year 3 $400,000 Year 4 $432,800 The large trucks are expected to cost $720,000 and to have a four-year useful life and a $77.000 salvage value In addition to the purchase price of the trucks, up-front training costs are expected to amount to $11.000 Solomon Delivery's management has established a 14 percent desired rate of return. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a.&b. Determine the net present value and present value index for each investment alternative (Enter answers in whole dollar, not in million. Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Purchase of City Vans Purchase of Trucks a Net Present Value (NPV) b. Present Value Index (PVI) TABLE 1 PRESENT VALUE OF $1 1 n 4% 5% 6% 7% 8% 99 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 2 0.924556 0.907029 0.889996 0.873439 0.857339 0.841680 30.888996 0.863838 0.839619 0.816298 0.793832 0.772183 4 0.854804 0.822702 0.792094 0.762895 0.735030 0.708425 5 0.821927 0.783526 0.747258 0.712986 0.680583 0.649931 6 0.790315 0.746215 0.704961 0.666342 0.630170 0.596267 7 0.759918 0.710681 0.665057 0.622750 0.583490 0.547034 8 0.730690 0.676839 0.627412 0.582009 0.540269 0:501866 9 0.702587 0.644609 0.591898 0.543934 0.500249 0.460428 10 0.675564 0.613913 0.558395 0.508349 0.463193 0.422411 11 0.649581 0.584679 0.526788 0.475093 0.428883 0.387533 12 0.624597 0.556837 0.496969 0.444012 0.397114 0.355535 13 0.600574 0.530321 0.468839 0.414964 0.367698 0.326179 14 0.577475 0.505068 0.442301 0.387817 0.340461 0.299246 15 0.555265 0.481017 0.417265 0.362446 0.315242 0.274538 16 0.533908 0.458112 0.393646 0.338735 0.291890 0.251870 17 0.513373 0.436297 0.371364 0.316574 0.270269 0.231073 18 0.493628 0.415521 0.350344 0.295864 0.250249 0.211994 19 0.474642 0.395734 0.330513 0.276508 0.231712 0.194490 20 0.456387 0.376889 0.311805 0.258419 0.214548 0.178431 10% 12% 14% 16% 20% 0.909091 0.892857 0.877193 0.862069 0.833333 0.826446 0.797194 0.769468 0.743163 0.694444 0.751315 0.711780 0.674972 0.640658 0.578704 0.683013 0.635518 0.592080 0.552291 0.482253 0.620921 0.567427 0.519369 0.476113 0.401878 0.564474 0.506631 0.455587 0.410442 0.334898 0.513158 0.452349 0.399637 0.353830 0.279082 0.466507 0.403883 0.350559 0.305025 0.232568 0.424098 0.360610 0.307508 0.262953 0.193807 0.385543 0.321973 0.269744 0.226684 0.161506 0.350494 0.287476 0.236617 0.195417 0.134588 0.318631 0.256675 0.207559 0.168463 0.112157 0.289664 0.229174 0.182069 0.145227 0.093464 0.263331 0.204620 0.159710 0.125195 0.077887 0.239392 0.182696 0.140096 0.107927 0.064905 0.217629 0.163122 0.122892 0.093041 0.054088 0.197845 0.145644 0.107800 0.080207 0.045073 0.179859 0.130040 0.094561 0.069144 0.037561 0163508 0.116107 0.082948 0.059607 0.031301 0.148644 0.103667 0.072762 0.051385 0.026084 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 n 2 3 5 6 7 8 9 4% 0.961538 1.886095 2.775091 3.629895 4.451822 5.242137 6.002055 6.732745 7.435332 8.110896 8.760477 9.385074 9.985648 10.563123 11.118387 11.652296 12.165669 12.659297 13.133939 13.590326 6% 0.943396 1.833393 2.673012 3.465106 4.212364 4.917324 5.582381 6.209794 6.801692 7.360087 7.886875 8.383844 8.852683 9.294984 9.712249 10.105895 10.477260 10 11 5% 0.952381 1.859410 2.723248 3.545951 4.329477 5.075692 5.786373 6.463213 7.107822 7.721735 8.306414 8.863252 9.393573 9.898641 10.379658 10.837770 11.274066 11.689587 12.085321 12.462210 7% 8% 9% 10% 12% 14% 16% 20% 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.833333 1.808018 1.783265 1.759111 1.735537 1.690051 1.646661 1.605232 1.527778 2.624316 2.577097 2.531295 2.486852 2.401831 2.321632 2.245890 2.106481 3.387211 3.312127 3.239720 3.169865 3.037349 2.913712 2.798181 2.588735 4.100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 2.990612 4.766540 4.622880 4.485919 4.355261 4.111407 3.888668 3.684736 3.325510 5.389289 5.206370 5.032953 4.868419 4.563757 4.288305 4.038565 3.604592 5.971299 5.746639 5.534819 5.334926 4.967640 4.638864 4.343591 3.837160 6.515232 6.246888 5.995247 5.759024 5.328250 4.946372 4.606544 4.030967 7.023582 6.710081 6.417658 6.144567 5.650223 5.216116 4.833227 4.192472 7.498674 7.138964 6.805191 6.495061 5.937699 5.452733 5.028644 4.327060 7.942686 7.536078 7.160725 6.813692 6.194374 5.660292 5.197107 4.439217 8.357651 7.903776 7.486904 7.103356 6.423548 5.842362 5.342334 4.532681 8.745468 8.244237 7.786150 7.366687 6.628168 6.002072 5.467529 4.610567 9.107914 8.559479 8.060688 7.606080 6.810864 6.142168 5.575456 4.675473 9.446649 8.851369 8.312558 7.823709 6.973986 6.265060 5.668497 4.729561 9.763223 9.121638 8.543631 8.021553 7.119630 6.372859 5.748704 4.774634 10.059087 9.371887 8.755625 8.201412 7.249670 6.467420 5.817848 4.812195 10.335595 9.603599 8.905115 8.364920 7.365777 6.550369 5.877455 4.843496 10.594014 9.818147 9.128546 8.513564 7.469444 6.623131 5.928841 4.869580 12 13 14 15 16 17 18 19 10.827603 11.158116 11.469921 20